[SMM Rebar Daily Review] Cost side shifts downward, bottom prices still face downside risks.

Rebar prices drifted lower this week, with the nationwide average price at 3,052 yuan/mt, down 40 yuan/mt WoW from last Friday. Supply side, although raw material prices have recently eased, most steel mills are still loss-making and production enthusiasm has weakened. Moreover, mills in central and north China are under cash flow loss pressure and have short-term maintenance plans, which will further ease production pressure. In addition, electric furnace mills are facing deepening losses, coupled with difficulties in scrap collection during the summer. Some producers have further reduced operating hours, with a few planning to halt production next week. The electric furnace operating rate is expected to continue its downtrend. Demand side, the falling price trend combined with the off-season led to overall moderate trading. Additionally, some regions affected by rain saw limited project construction and a slowdown in downstream procurement pace. Inventory side, mill inventories fell while social inventories rose, keeping total inventories in an accumulation phase. Off-season inventory pressure is gradually emerging. It is understood that mill profitability diverged by region. East China mills maintained relatively good performance, with some still generating gross profits. However, mills in north and northwest China suffered heavier losses, and with higher inventory pressure, they are about to face cash flow losses. Looking ahead, the second round of coke price cuts has been implemented, pushing the cost side lower and weakening support for the price floor. Returning to rebar fundamentals, the supply-demand imbalance is accumulating, and weak demand offers little catalyst. Spot prices are expected to face downside risks next week. In the later period, attention should be paid to market capital flows and steel mill maintenance and production cuts.